NOTICE DATE: November 29, 2021

NOTICE TYPE: W-B112921-01 Financial/Credit

SHORT DESCRIPTION: Standard Form Letter of Credit for Satisfying Securitization Default Charge Credit Requirements under PURA Chapter 39, Subchapter M

INTENDED AUDIENCE: All Counter-Parties

DAYS AFFECTED: December 11, 2021

LONG DESCRIPTION: Nodal Protocol Revision Request (NPRR) 1103, Securitization – PURA Subchapter M Default Charges, which is expected to be approved by the ERCOT Board of Directors (Board) at its December 10, 2021 meeting.

NPRR1103 requires Counter-Parties to, at all times, maintain Securitization Default Charge escrow deposits at or above the amount of the Counter-Party’s Securitization Default Charge Credit Exposure (SDCCE). Moreover, each Counter-Party is required to maintain any required Securitization Default Charge escrow deposit in a form acceptable to ERCOT—i.e., via cash or an unconditional, irrevocable letter of credit naming Texas Electric Market Stabilization Funding M LLC (TEMSFM) as the beneficiary.

Therefore, a new letter of credit standard form naming (TEMSFM) as the beneficiary is necessary to allow ERCOT to collect Securitization Default Charge escrow deposits that are in the form of letters of credit. Accordingly, ERCOT has drafted a new standard form letter of credit for satisfying securitization Default Charge credit requirements under PURA Chapter 39, Subchapter M, and will be presenting it to the Board for approval at the December 10, 2021 meeting. ERCOT based the draft TEMSFEM letter of credit form off ERCOT’s current standard form letter of credit. The TEMSFEM letter of credit form is substantially similar to the ERCOT standard form letter of credit. However, the TEMSFEM letter of credit form identifies TEMSFEM as the beneficiary, rather than ERCOT.

ERCOT is providing Counter-Parties with a copy of the draft TEMSFEM letter of credit form expected to be approved at the December 10, 2021 Board meeting to allow Counter-Parties to prepare to obtain financing necessary to meet the creditworthiness requirements under NPRR1103. Please see attachment. ERCOT will issue a follow-up Market Notice following approval of the TEMSFEM letter of credit by the ERCOT Board, which will also contain wiring instructions.

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